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Lawyer Layoffs Shifting Legal Landscape

By Curt Nickisch (WBUR)

The recession is forcing changes at local Boston law firms. A decline in business has led to almost 200 layoffs at law firms since November, according to the publication Massachusetts Lawyers Weekly. The bad economy also has law students about to graduate this year worried about finding work.

It's a great time for Rick Gottlieb to be hiring. He runs a small bankruptcy law practice in a cramped and cluttered downtown Boston office. Within an hour of posting a new associate job, he had 20 applications.

RICK GOTTLIEB: We have one person here who has a 2008 cum laude graduate from the New England School of Law, there's another person here graduating summa cum laude. I mean the quality of the legal acumen of the people that I'm now seeing is remarkably high. What that says to me is that even the most highly qualified are having a very very hard time finding a job.

They're having a very very hard time finding a job, because the global economic downturn has turned on many white collar law firms. They can't afford to keep six-figure salaries around when there's no work.

JUDY ST. JOHN: What is so unprecedented is the fact that firms now are very openly admitting that they're having layoffs.

Judy St. John is a former attorney and now a headhunter at Hoffman Recruiters in Boston. She says in the past, law offices typically cut staff by citing poor evaluations. So-called stealth layoffs are not technically layoffs. But now, she says, there's no pretense. She's been getting lots of calls from newly unemployed lawyers looking for work. She tells them to be patient.

ST. JOHN: I think it'll be quite a while before there will be a spot for everyone. Some of them are contemplating career changes right now.

What we're seeing here is the deflating of a bubble, says Michael Rynowecer. He's president of the BTI Consulting Group in Wellesley. The law firms being hit hardest, he says, are the national ones that do mergers and acquisitions. Fewer such deals are getting financed nowadays. Rynowecer says that's killing these big firms that tended to overstaff with pricey lawyers.

MICHAEL RYNOWECER: Because up until you know a year ago, or even six months ago, no large law firm wanted to be in a position where they could not accommodate a large deal.

Because those deals can earn law firms tens of millions of dollars.

RYNOWECER: In the scheme of a billion-dollar transaction, I'm going to make so much money on this deal that if I have to pay my lawyer a little bit more, I'm willing to do that.

Now those megadeals are few and far between. Rynowecer says on the other hand, the mid-sized and regional law firms are mostly holding their own, because they didn't ramp up their costs so much. He says what's also saving many Boston firms is a lot of work in biotech and pharmaceutical transactions. Without that, the layoffs would be much uglier. Either way, he says, law offices are getting the message to not be so darn expensive.

RYNOWECER: Overall, the marketplace is saying they're not happy with the fee structure. There's a lot of pushback right now because supply is now well in excess of demand. So you're seeing new rate structures. Things like fixed fees. Alternative billing. Changes in the way law firms staff cases. Which you were not seeing 18 months ago.

In the end, Rynowecer thinks this rebalancing is going to be good for the free market. And he says out-of-work lawyers might want to check in with litigation firms. Because even in a bad economy, people are still suing each other.

This program aired on March 3, 2009. The audio for this program is not available.

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